Head For The Beach

It’s the height of summer and over here in Spain we are mere days away from the entire country shutting down in August. Yes, I am dead serious. Starting next week it will be impossible for anyone on the Iberian Peninsula to make a doctor’s appointment, get a haircut, fix your car, meet with an attorney, negotiate a contract, etc. Just found some tentacle growing out of your ear? Tough luck Jos√© – it’ll have to wait a few weeks. Got hit by a truck riding your moto and you may have severed your spinal cord? Better walk it off tough guy – those x-rays will have to wait until the doctor’s back from the beach.

Anything business or health related will have to wait until September as most offices here simply shut down for a minimum of two weeks, economic crisis be damned. For a born German who spent over 20 years in the United States this is a rather alien concept to wrap one’s mind around. It’s not that the Spaniards lack sufficient holidays during the rest of the year, if you get my drift. So apparently it will once again fall on me, the lowly Mole, to keep the Spanish economy running for the next four weeks as my lair will apparently be the only business open during August. Hey, but I can’t make any promises – it is brutally hot over here and it’s getting hotter by the day. I think I may have to raise subscription fees just to be able to afford the electricity bill as my industrial scale air conditioner is blowing day and night. And did I mention the humidity? It’s not California, that’s for sure.

Alright, and now that I have properly set the mood let’s see where we are this morning. Still bouncing around in the range of pain – the high volatility sideways range persists and entries near the center are veritable coin flips. But the good news is that it gets worse:

This is the event calendar for today and tomorrow and guess what, it’s that time of the month again. Wednesday the Fed is scheduled to announce its interest rate decision and also report on its MBS and treasury purchase programs. I don’t expect any type of resolution before tomorrow at 2:00pm EDT and most likely we’ll be seeing sideways flat or gyrating tape in the interim. May actually be a good time to watch the Zero Lite indicator if you happen to be a sub as sideways days like that make for good scalping/swing trading opportunities.

For the rest of you guys I recommend you discover your inner Spaniards and find yourself a nice beach, preferably with bar service. And if there’s no beach nearby you live then find yourself a lake, a cool mountain resort, or if everything else fails head to your favorite coffee shop or watering hole. Bring a book and turn off your laptop/ipad/iphone what have you so you’re not tempted to check the tape. Anything will be better than trading for the next 30 hours. That’s it – see you guys tomorrow!

What – you’re still here? What part of taking the day off wasn’t clear to you? You are an addict, you know that, right? Well, I understand because so am I. Which is why I kept hunting around a bit for short term setups to bridge us over until tomorrow. Very loose correlation to U.S. markets would be good. Here’s the EUR/SEK (swedish krona) which is in a very interesting configuration. I want to be long above 9.185 with a stop below the 25-hour SMA.

And then there’s platinum – may be affected tomorrow at 2:00pm of course. So if you grab this long above 1490.6 then be out and about by 1:30pm tomorrow. Otherwise it looks like a solid long setup after a nice correction. Decent odds and worth 1R on my end if it makes it over my trigger.

Alright, and that’s it for today. UNLESS of course something very exciting/dramatic happens during the session ;-)

 

It’s not too late – learn how to consistently bank coin without news, drama, and all the misinformation. If you are interested in becoming a subscriber then don’t waste time and sign up here. The Zero indicator service also offers access to all Gold posts, so you actually get double the bang for your buck.

Cheers,

No Crying Over Spilled Milk (Or Beer)

I’m sure you all know what I’m talking about. Here we were trying to short this bitch several times in the past two days which on my end resulted in three ignominious stop outs – the last one at 1982. Only 1.5R lost, so it wasn’t a big deal but pretty much what I told you yesterday ‘would happen’ of course ‘did happen’ the next day. There was no reason for my stop to be at 1986 – it was too far in enemy territory. And then equities got Amazoned and here we are fifteen SPX handles lower. So what do we do now?

I tell you what we’re going to do. ABSOLUTELY NOTHING. We did everything in our power to exploit an entry opportunity near an inflection point and we simply didn’t get in. That’s life and unless you were on the inside there was no knowing ahead of time that Bezos would slip on the banana peel last night. Don’t beat yourself up – actually better yet, get used to it. Which is why we don’t take large risks on the equities side – or any correlated market for that matter. 1% is the max and if you’re a stock market junkie then always keep a close eye on being as delta neutral as possible (look it up or ask in the comment section).

Now on the ES futures we’re near 1971 right now and there are no major support zones nearby. ES 1966 looks like the next best line in the sand as the 100-hour BB is lingering around down there.

The S&P cash however has been holding its 100-hour SMA and we’ll have to wait until Monday to see if it holds.

But the real news of the day is the one that hasn’t been reported. While everyone else is talking about yesterday’s losers I’ve been taking a long position on the Dollar side (yes, I can’t believe I just said that). This is actually a weekly setup I shared with my subs last night and originally we’ve been expecting ole’ bucky to do the same old thing which is fold like a chair near any major LT resistance. Now I can’t promise/expect that this time it’ll be different but those two NLBL breaches do look promising. The fun may begin if we see a pop aboe 80.993 – so make it 81. That’s where the 25-day SMA sits right now and we’ve got plenty of air looming above.

This is the first time I’ll show the turkish lira here and I have to confess that I haven’t traded this one before. So I’ll ease myself into this one with 1/2R. I however do like the double inside day – and I’ll play the outer one on the stop side. I hope that’s clear as I don’t think my drawing is. Long Sunday on either breach of today’s candle (high or low) – but set your stop on the opposite side of the Thursday candle.

More setups waiting below the fold for my intrepid subs:


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And now it’s time again to kick back and crack open a bottle of your favorite alcoholic beverage. As you all know in my case that of course would be a bottle of Hefeweizen. A simple Paulaner is one of my favorites – it’s smooth but has that typical Bavarian disciplined but hefty flavor. Simple pleasures…. Well, I hope to see you all next week :-)

Prost!

Friday Morning Briefing

Welcome to our morning briefing. Here we are reviewing short term setups ahead of the NYSE opening bell. If you are a scalper or swing trader then these setups may be of interest to you. As usual keep in mind that these are short term setups although they could be used as early entries for more longer term positions.

For some reason we’ve hit the motherlode on the setup front this morning – everything is coiled up and ready to rip. But careful – it’s quadruple witching Friday and that means you need to set your stops particularly generous today – add at least 25% to your common distance. But before we get to the goodies let’s talk about price action on the equities side. We’ve popped quite a bit higher and then pushed sideways all day with minimal participation (see the Zero indicator flat lining) in a common ramp & camp fashion. What does that mean and where do we go from here?

Well right away that is the wrong question.¬†There is no ‘right’ or ‘wrong’ when it comes to inherently flawed mindsets related to trading. You simply trade according to what *at the current time* is the most probable outcome – and sometimes that includes both directions (I can literally see heads explode here right now).

Let me give you an example. I have a chart on which price has reached an important inflection point based on your ‘lens’ (it’s all mental models anyway). How about a 100-day SMA plus we throw in a 25-week SMA nearby for good measure. PLUS the daily Bollingers have compressed and I suspect a big move is coming. Now based on prior history price usually has either bounced back or breached and then pushed higher very rapidly. Both trades could be profitable so I would get positioned short first with a stop above that inflection point. I expect to be stopped out of course (you always do) and once that happens I flip positions to be long with a stop below what now is tentative support. May I get whipsawed once or twice? Sure – can happen but in this particular case it doesn’t matter to me as I expect increased volatility to make up for some of the early losses if they appear.

Does this example always work? Of course not – but it’s an adaptive approach that over the long term has a positive edge. Now note that I spent a maximum of 5 minutes looking at my charts as the TA should only occupy 20% of my trading day. The other 80% are 20% campaign management and finally the most important and largest aspect of trading: self management, which is 60% of trading.

Too many of you guys confuse swapping directional opinions with trading – to me it’s merely mental masturbation. If that offends your fragile egos then GOOD – you are way too comfortable with your entrenched approaches. Trading is all about persona development and if you get settled/comfortable in a path that answers easy answers then the market will hand out instant punishment. Which btw, is why I love the trading racket – unlike in politics, the law, or religion it is not up to interpretation or opinion. Your acceptance of reality has no bearing on its validity – if you’re positioned incorrectly you will lose. In essence your job as a trader is to manage loss as best as possible.

Now let’s talk about the chart above – let’s just look at the price action. After touching and successfully retesting the 100-hour SMA the SPX is now back at the upper 100-hour Bollinger which has nicely contained price action over the past weeks and months. We may get scenario A or we may get scenario B – each direction is completely plausible as price has not yet told us that it’s ready to turn. Going short here right now is tempting as we ‘have not breached the new highs’, right? Well, yes and wrong – the assumption is that breaching the new highs has any meaning whatsoever – I mean we could breach it and then fall back like a rock! Maybe – so let’s look at how price usually moves:

This is our daily volume profile chart on the E-Mini futures – all based on trading volume concentrations. When we touched that 100-hour on the SPX we were near a volume hole and as you can see the big move up (and the prior move down) was exploiting an ‘easy move range with plenty of participation. Where are we now? Near a veritable volume chasm and that means we should be prepared for a pull back – but we can’t just go short without evidence. If there isn’t any on the daily (i.e. as in right now) then we look at the hourly panels instead for patterns. So let’s do that!

And there we have two Net-Lines opening the door to both directions. We are also seeing a bit of BB compression and if you curious as to what that means then look no further than to what happened on the 18th around 15:00 EDT. So we could get a big move here shortly – if you manage to get positioned early on the hourly then you can build your position up as the tape continued to push your way. And that means you may get an early entry into what turns out to be a daily or even weekly campaign.

And that is how professional traders approach it – it’s imperative that you remain nimble and continue to assess what the tape is telling you. How does that compare with simply drawing a line and saying – I’ll go short here, no matter what because the tape ‘is supposed to fall from here?’

On to the setups – crude looking at a lot of resistance here and I’m short with a stop above the 100-hour SMA.

AUD/NZD – coiled up like a clock and I’m long with a stop below 1.077.


More charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don't waste time and sign up here. And if you are a Zero subscriber you get free access to all Gold posts, which gives you double the bang for your buck!

Please login or subscribe here to see the remainder of this post.

Here’s a new service I dug up the other day – dukascopy has a lot of negligible content but if you’re an Forex trader (and most of us are) then the daily spread monitor is very good medicine. So if you see spreads you can drive your car through it may just be your broker ripping you off.

Be careful if you’re trading the CAD crosses around 8:30am EDT – event risk. See you guys later today.

Cheers,





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  3. recent misdeeds

    1. I Hope You Bought Insurance
    2. Post FOMC Musings
    3. Bear Time!
    4. Head For The Beach
    5. Insurance Is Still Cheap
    6. Don’t buy the dip this time
    7. No Crying Over Spilled Milk (Or Beer)
    8. Entries Do Not Matter
    9. Last Chance For The Bears
    10. Three Strikes You’re Out




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